“You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.”  ~ Charles Munger

Warren Buffet speaks about staying within your circle of competence. This means simply knowing where the line is between what you’re knowledgeable about and what you’re not. I know about residential real estate investing but I don’t know anything about gold mining. So, I should keep my focus in real estate and avoid mining. Easy to say, but most of us have failed this test. If I’m not competent to argue the pro’s and con’s of a stock, then I probably shouldn’t invest there. If I don’t really understand construction, I shouldn’t attempt to build my own house. 

You can actually have a relatively small circle of competence and yet do very well. Business owners do it all the time. They are very specialized in their niche. As long as they stay within their specialty, they do fine. Then they branch off into a completely new investment area, and things frequently do not go well at all. Simply working on knowing where the line is on your circle of competence and then slowly expanding that circle can save you from making bone-headed decisions and costly errors. Learn to be honest with yourself. Have you been trying to operate outside the circle?

“Failure is simply the opportunity to begin again, this time more intelligently.”  ~ Henry Ford